David Graeber -- Debt: the first 5,000 years
============================================

One of the most important and fascinating subjects discussed in this
book, is the different forms of money, why we have them, what they
indicate about a time or place, and so on.  Graeber believes that
coinage containing precious metals becomes prevalent during times of
war and under other circumstances where you cannot count on or trust
someone on the other end of a transaction, whereas "trust money"
(debt, credit, fiat money, bank notes, etc) comes into use when you
*can* count on those with whom you engage in financial transactions.
But, he also claims that coinage often has a value above that of the
(precious) metal it contains, which indicates the existence of some
amount of trust.

Graeber also wants to distinguish between different kinds of trust,
in particular between personal trust and impersonal trust.  He
claims that most of what we have today (in the U.S. at least) is
money (credit, often) based on impersonal trust: your credit score,
for example, rather than on a merchant's knowledge of your
reliability, family, social circle, etc.

Graeber worries that this kind of impersonal money, together with a
political system that increasingly privileges business seems to be
pushing us in a direction where borrowers have less and less
leverage with their lenders.  For example, credit card borrowers and
those who hold student loan debt have less and less power to
negotiate their loans, to threaten default on their loans as a way
of pressuring the lender to forgive part of the loan, etc.  Graeber
believes that making a loan and holding a debt has associated risks
and that lenders should be willing to accept that risk.  If they are
not willing to do so and if the economic and political system backs
them up in their refusal to do so, then the system has become too
punitive to holders of debt, and we are headed back toward the use
of debtors prisons.

There are some claims that Graeber makes that are counter to
conventional or received wisdom, and that's part of what makes this
book interesting.  For example, the Middle Ages, instead of being
the dark, miserable times that we've been told, actually were an
improvement for most people.  Mostly because of the collapse of
empires, slavery was considerably reduced.  And, the amount of work
demanded of most people was reduced.  Graeber's reasoning is that
since cities went into decline, there was not the large urban
populations that needed to be fed.  So, the need for large amounts
of forced labor and onerous taxes needed to feed and support
imperial cities was, to a great extent, eliminated.  The break up of
empires, the disappearance of large military forces, and the general
loss of control meant reduced power to extract work and resources
from peasants.

Another somewhat counter-intuitive claim of Graeber's is that during
the Middle Ages although the amount of coinage was reduced (it was
no longer needed to pay soldiers), attention to and the use of
credit money (loans, promissory notes, etc) increased.  And, thus
the money system may have been more rather than less sophisticated
than during times of empire.

Also, in part because of endowments, more and more gold, silver, and
precious metal in general ended up in churches and monasteries and
temples, thus reducing the amount of precious metal available for
coins.  This required the use of trust money, e.g. credit, notes,
etc.  We can view this as a shift toward abstraction in the market
place and away from concrete forms of instruments, especially coins,
although even coins, especially when they trade above the value of
the metal in them, have a component of trust in them.

China, according to Graeber was very advanced in this regard.
Because of their highly organized bureaucracies and the
geographical range of the control of Chinese government, that
government could demand that almost anything (again according to
Graeber) count as money, and, for example, that it be the required
medium for the payment of taxes.

Graeber is also trying to encourage us to view debt without myth and
emotion.  For example, he wants us to enter into debt relationships
(and that is what trust money and debt is: a relationship) without
the mythology and emotions that make us feel things like: (1) not
paying debts is evil; (2) all debts must be paid; (3) God
disapproves of those who fail to pay their debts; etc.  He wants us
to view debt as a business relationship unchained from emotion.
Yes, we will want to pay our debts most of the time.  However, a
lender enters into a relationship with a certain amount of risk, and
that risk must be recognized.  This is, I believe a very liberating
point of view.

An example of Graeber's intentions and the view of debt and values
(feelings of virtue, guilt, evil, etc) he is trying to guide us
toward, is his believe that we should try to separate religion from
materialism (and markets and debt etc).  Graeber wants us to view
our materialistic relationships (especially our debts and loans)
through a lens that is unclouded by and not distorted by religion,
religious values, the tenants of any particular local church, etc.

A historical note, and one that I found fascinating to think about:
Graeber believes that debt and credit relationship came very early
on in the development of civilization and organized society, likely
3,000 years ago or more.  And that, since debts required accounting
and records, those relationships may have encouraged and facilitated
the development of mathematics and written language.  I suspect
that, if you understand Graeber a little better than I do, you will
see that he believes that societies are build out of those
credit/debt relationships and the records and financial instruments
needed to make them work.  It is both (1) the abstract and symbolic
nature of credit and debt and (2) the interpersonal relations which
debt and credit promote are the enablers of complex societies.

I'm not sure that Graeber is trying to argue for an alternative to
capitalism, but he is certainly trying to push us toward thinking
about alternative forms of capitalism.  (1) He certainly is against
the "perma-growth" form of capitalism that demands that we produce
and consume larger amounts of goods and services each year.  (2)
And, he is very much against capitalism based on slavery (or
effective slavery) and debt peonage (debts that force the debtor to
work without the hope of paying off that debt).  But, then I believe
he claims that there are no successful forms of capitalism that are
*not* based on some kind of slavery or harsh working conditions.

One of Graeber's criticisms of modern capitalism seems to be it's
ability to remove the "personal" from the relationships of credit
and debt.  That creates, in his view, non-moral actors.

By the way, I found that Graeber's alternative to the view that
capitalism is the only solution and that it will make all the world
better and happier a refreshing change.  Certainly, if we are going
to fix the problems that our economy keeps creating, we have to
understand some of the problems and some of the variations.

I believe that Graeber is attempting to warn us about what he calls
the military-coinage-slavery complex.  Or, maybe it's the
military-coinage-taxation connection.  Nations and rulers who have
armies pay their soldiers in coin (or another type of money if
possible), the soldiers buy goods and services from merchants, the
rulers tax the merchants, and then the rulers pay the soldiers.  So,
an economic system, armies, war, etc are all brought into existence
at once.  In a sense, the reason that a government taxes citizens
and demands payment of taxes in the official currency is so that
citizens earn or acquire that currency which forces others to earn
money in that currency, etc.  All of which makes the markets and the
labor force (and the economy in general) go.  It's called economic
activity, I suppose, and when we want to get out of a recession, we
are asking for more of that kind of activity.

If you decide to read this book, and I certainly think it is worth
reading, you should be a little aware of Graeber's background.  He
has worked on efforts to prevent the IMF from forcing some countries
to make payment on their loans regardless of cost and regardless of
who will be hurt.  One of his arguments is that the poor, who are
often the ones to suffer, were not the ones that initiated the
borrowing in the first place and likely did not get much of the
benefit from those loans anyway.  So, you should not be surprised
when you detect that Graeber is less than enthusiastic about severe
forms of legal coercion to force loan repayment.

One very general note -- Because of the wide geographical range
thousands of years of time covered by Graeber's analysis, he invites
us to think about when where the "good times", and what was good and
bad about those times, and for whom.  We are reading a book that
ranges across history that includes the destruction of cities,
massive military conquests and deaths, plagues, and extremely
punishing slavery, as well as times of prosperity (though perhaps
prosperity for a select few) and peace.  The question "When and
where would we want to have lived?" if not when and where we are
now, is an amusing one.

Even now, in times that many of us living in advanced and calm parts
of civilization think are the good times, there are parts of the
world where people are suffering from violent and cruel military
operations (Syria, especially) and places where the treatment of
large labor forces cannot be considered benign or free.  Perhaps we
need to replace the claim that capitalism brings prosperity with the
claim that capitalism brings prosperity for *some* of us.

Underneath Graeber's history of debt and credit and money there is a
critique of capitalism as it currently functions in much of the
developed countries.  That critique goes a bit like this --
Capitalism does not work when everyone wants their fair slice.
Capitalism requires wage slaves, perhaps real slaves and debt
peonage.  It can't work without a supply of very cheap labor, so
cheap that those laborers do not have a living wage.  And, of
course, there are all the ills and problems that must be patched up
or, in some cases, just suffered, such as booms and busts, the need
for bailouts for banks, the need for banking insurance, constant
supervision for malfeasance, and on and on.  If you ignore all
those, and the inequality, too, then capitalism works pretty good.
Or, perhaps it's not that capitalism works well; it's that we have
no reasonable alternative.

Perhaps I'm being too negative.  If you want a more sanguine and
humorous account of capitalism that Graeber's, look at "On The
Wealth of Nations: Books That Changed the World" by P. J. O'Rourke.

There are lots more fascinating ideas in this book (e.g. his belief
that capitalism demands continuous, permanent growth), but this
review is long enough already.

Some entertaining and related reading:

- "Extraordinary Popular Delusions and the Madness of Crowds", by
  Charles MacKay

- "Funny money", by Mark Singer

07/08/2013

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